Logistics Management - June 2010

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Special Report: Top 50 Global 3PLs A SPECIAL SUPPLEMENT TO LOGISTICS MANAGEMENT ITM and other 3PL market segments as the economy steadily recovers. Overall, U.S. 3PL market gross revenues decreased 16 percent in 2009 dropping to $107.1 billion. The dedicated contract carriage (DCC) segment fell 16 percent, while domestic transportation management (DTM) was down 15.1 percent in gross revenue and 11.4 percent in net revenue. Value-added warehousing and distribution (VAWD) suffered with only single digit reductions. The VAWD segment’s gross and net revenues were both down 5.3 percent and 6.9 percent, respectively, compared to 2008. Net income margins dropped in all categories. Net income in the ITM segment had a 6.3 percent drop. VAWD took the deepest plunge with a 25 percent drop. Overall, the 3PL net income margin dropped from 5.3 percent in 2008 to 4.7 percent in 2009. “We anticipate a significant recovery for 3PLs in 2010,” says Richard Armstrong, co-author of the report. “Many first quarter results suggest a recovery that will restore the third-party logistics market to 2007 levels, and we predict 13.4 percent growth in gross revenue and 8.3 percent growth in net revenue in third-party logistics for 2010.” Shippers may now be left wondering whether service metrics will be tightened along with this slight surge. Flags of convenience Richard Armstrong did not have an immediate answer; however, he did note that the line between domestic and global players continues to blur, saying that the 3PL industry mirrors what has occurred in the ocean carrier sector over the years. “Does it really matter if you book cargo on a vessel that is based in Denmark” he asks. “It’s carrying containers from Korean and Japanese shippers, and may even be sailing under a flag of convenience. The national identity is gone, and the idea of doing business in a single national market is nonsense.” He also noted that the U.S.-based multinational shipper McDonalds makes more money in foreign markets overseas. “So that’s what’s happening to the paradigm,” he says. “Most of the really big 3PLs are following the same model. To be purely domestic is to remain stuck in one place, and no one is going to sacrifice potential revenues to do that.” At the same time, however, Armstrong maintains that some 3PLs are stronger in one region than another—and, by that measure, the “domestic” category is still valid. “But since the greatest growth is going to take place in India and China in the coming years, we are concerned about 3PL service in the U.S.,” he says. “If it’s all outsourced, this country will be a fading power…like Great Britain in the 20th Century.” London-based Eyefortransport (EFT) may take issue with the historical allusion of this statement, but certainly not Experiencing the economic slowdown 100% 80% 60% 40% 20% 0% 3PL Manufacturers/ retailers Solution providers Other No Not yet, but we expect to soon Yes, but things are improving Yes SOURCE: EFT NORTH AMERICAN 3PL MARKET REPORT 100% 80% 60% 40% 20% 0% Timescale for economic growth 3PL Manufacturers/ retailers Solution providers Other It will take to 2012 and beyond It will take sometime during 2011 It will by the middle of 2010 It will by the end of 2010 It did by the end of 2009 SOURCE: EFT NORTH AMERICAN 3PL MARKET REPORT Overall Overall with the insight. Research done by the analysts for its North American 3PL Market Report suggest that a modest rebound must take place this year to keep the U.S. and its hemispheric neighbors in the game. The report focuses on the opinions of logistics service providers (3PLs/4PLs), manufacturers, retailers, as well as supply chain technology providers to offer a comparative view between these groups of respondents. The report also pays particular attention to the state of the global economy along with other shipper concerns. “The end of 2009 going into 2010 has been a time of challenges and opportunities in the supply chain and logistics industry,” says Katharine O’Reilly, EFT’s senior vice president of research. “On the one hand, the fallout from the recession continues to rock all industries. Yet on the other hand, the 48S June 2010 • Logistics Management
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Logistics Management - June 2010

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